Liquidity commonality across the bond and CDS markets

The paper examines various liquidity measures across the corporate bond and credit default swap (CDS) markets. The results, from the factor decompositions for individual liquidity measures and across various measures, show that there is a strong liquidity commonality across the bond and CDS markets. In addition, the paper finds that the liquidity common factor has significant impact on the unexplained part in the credit spread changes by default risk factors